While the antics of payday lenders and how much they charged people for late or non-payment of loans gained lots of publicity, not everyone is aware that some big high-street banks are charging even more than the payday lenders did for those who fall into unarranged overdrafts.
For people in Scotland struggling with debts, they are finding that the high-street banks are charging rates that are seven times higher than payday lenders – with banks in Scotland among the worst of the offenders.
The research comes from consumer organisation Which? and they are now urging the banking regulator, the Financial Conduct Authority (FCA), to bring in a cap on high unarranged overdraft fees being imposed for current bank accounts.
The FCA is looking into the high overdraft fees
It now appears that the FCA is looking into the high overdraft fees being charged to customers.
Which? has revealed that a customer who dips into an unarranged overdraft for 30 days by £100 could be facing up to £180 in fees – compared with the £24 charge that a payday loan firm would impose.
The survey also reveals that 51% of overdraft users have fallen into an unarranged overdraft and the bank is applying charges over each month rather than for the number of days that the additional money was borrowed.
Essentially, this means a customer could be paying two charges if they are overdrawn for 30 days across two separate months.
Which? points to NatWest, which is owned by the Royal Bank of Scotland, for charging £180 for an unauthorised £100 overdraft.
Customers with Santander or Lloyds could be charged £160.
A spokeswoman for Which? said: “It’s not right that high-street banks can charge people with a financial shortfall that is so much more than would be charged by a payday loan company, particularly if the cash is borrowed over a two month charging period.
‘Consumers will always be hit with exorbitant fees’
“If banks can set the charges then consumers will always be hit with exorbitant fees.”
NatWest says it encourages its customers who are looking to fall into an unauthorised overdraft to contact them for an alternative solution which would help reduce costs.
Santander and Lloyds also said they had similar tools in place that would help customers save and manage their money more effectively.
However, for people living in Scotland there are a number of solutions to debt problems that may be of help.
For instance, they can speak with an experienced debt adviser who will be able to offer impartial help and this may include pointing them in the direction of a trust deed, for instance.
A Scottish trust deed is a method for someone struggling with their debts to repay what they owe at an affordable rate and this could be for up to 48 months.
Big attraction for a trust deed
The big attraction for a trust deed is that the amount of debt that remains when this period ends is considered as unaffordable and could be written off.
There’s also the option of a debt arrangement scheme which is also only available for people living in Scotland.
Again, it’s an effective way to deal with debts and helps provide a debtor with some legal protection from their creditors hassling them.
Under the Scottish government run scheme, the debtor would repay what they owe at an affordable rate but, unlike a trust deed, they would repay everything.
The team at Scotland’s Trust Deed
There are also other potential debt solutions available and the team at Scotland’s Trust Deed will be able to give more help and guidance about debt consolidation and write off as well as a debt management plan and a full and final settlement.
They can also offer advice about sequestration which is a form of bankruptcy.
There’s more information about what someone living in Scotland who is struggling with their finances can do on the Scotland’s Trust Deed website.